Aging Iowa farmers and the anticipated farmland transfer
The demographics of landowners in Iowa have significantly transformed over the years with a continued increase in the land owned by individuals 65 and older. One crucial aspect of this evolving landscape is the need to transfer farmland to young and beginning farmers. Recent findings from the Iowa Farmland Ownership and Tenure Survey, led by Dr. Wendong Zhang, Cornell University (formerly of Iowa State University), can help explore some of the factors behind the shift in land ownership and the critical role of facilitating the transfer of farmland to the next generation.
Changing demographics and motivations
A significant portion of Iowa’s farmland is currently held by individuals aged 65 and older. In 2022, approximately two-thirds of the land falls under their ownership, a sharp contrast to the situation in 1982 when less than one-third was owned by this age group (Table 1). The aging rural population and the fact that 70-75% of farmers are now 55 years or older (Figure 1) indicate the impending wave of land transfer. A correlated phenomenon to this shift is the decrease in the percentage of Iowa farmland that is held to support the owners’ current income, i.e. relatively less land is now owned to generate income that will run a farming household. This can stem either from the increasing contribution of off-farm income for most family farms (Giri et. al., 2021) or the later-stage farmers having more established streams in preparation of retirement, changing their primary motivation for farming. Therefore, the percentage of land that is used to support the current income of farmers has dropped from 56% in 2012 to 38% in 2022. As fewer landowners keep farms to support their incomes, the motivation for land ownership has shifted towards other considerations.
A significant share of the total land, 37%, is now owned for family or sentimental reasons, and another 23% is owned as a long-term investment.
Anticipated farmland transfer and its challenges
With farming becoming an aging occupation, one would expect a substantial portion of farmland to be transferred to the next generation soon. It is interesting to note, however, that it is neither a novel observation nor a newfound concern. Dr. Mike Duffy highlighted 15 years ago that a significantly higher proportion of land being held by people older than 65 is signaling an anticipated transfer of about 25% of Iowa farmland in the following decade. Recent data shows that about 40% of Iowa farmland changed ownership in the past 20 years (Table 2), but a large-scale transfer to young farmers was not observed as the early-stage farmers own only about 2% of all Iowa farmland (Table 1). It is quite possible that some of this farmland was transferred to mid-stage farmers, who are already or will soon be aged 65 and above. Therefore, the wave of land transfer has continued to linger just off-shore for some time without a noticeable surge.
Moreover, while 80% of landowners are not actively planning to sell their land in the next five years, most of the remaining 20% willing to sell are inclined to sell to young and beginning farmers. However, one of the main challenges in transferring farmland to the younger generation is the financial barrier they face. Half of the Iowa landowners are concerned about the beginning farmers’ ability to pay fair market prices and afford large parcels of land (Table 3). While most respondents are optimistic about the longer-run success prospects of beginning farmers, the shorter-term financial barriers remain the most significant hurdle in facilitating the transfer of farmland to the next generation of farmers. Perhaps cognizant of that, 40% of the respondents of the landowners willing to sell to beginning farmers acknowledge that they are willing to sell to hardworking beginning farmers below fair market values, however, "hardworking" is a subjective criterion. Another concern is that 58% of Iowa landowners have difficulty finding enough quality beginning farmers. Therefore, initiatives like the Beginning Farmer Center in addition to government support and programs are important for assisting beginning farmers and facilitating the transfer process.
The Beginning Farm Center provides supporting information and resources across several farm business aspects like farm management, farm transition, succession, and tax preparations. In addition, one of the Center’s programs, Ag Link, is designed to connect experienced and later-stage farmers with new and beginning farmers to facilitate farmland transfer. Along with this, the government has several financial programs to help beginning farmers as well as with other groups that often remain underserved. The 2018 farm bill (which will remain effective until it is renewed) allocated 50% of all direct operating loans for qualifying beginning farmers and ranchers (Campbell, 2021). USDA’s Farm Service Agency (FSA) also offers microloans in regions with more small farms (Tulman, 2018). Microloans are smaller loans (with a maximum limit of $50,000 compared to the limit of $600,000 for direct ownership loans) with less stringent criteria for approval and reduced paperwork (USDA FSA, 2019). Therefore, there are several resources in place to support young and beginning farmers to reduce barriers to their farmland ownership.
Campbell, S. 2021. "USDA’s support for beginning farmers and ranchers". Farmers.gov.
Giri, A. K, D. Subedi, J. E. Todd, C. Litkowski, and C. Whitt. 2021. "Off-Farm Income a Major Component of Total Income for Most Farm Households in 2019." USDA Amber Waves. USDA Economic Research Service.
Tulman, S. 2018. "More Microloans Issued in Regions with Higher Concentrations of Small Farms and Beginning Farmers, Women, and Minorities." USDA Amber Waves. USDA Economic Research Service.
USDA FSA. 2019. "Microloans Factsheet." fsa.usda.gov.
Rabail Chandio, extension economist, 515-294-6181, email@example.com